Lockton Re has leveraged long-standing client and market relationships to get its burgeoning fac business moving, despite the challenges of global lockdown
What is Lockton Re’s strategy for growing the business once the global lockdown has eased?
At Lockton Re we view facultative as part of the overall suite of reinsurance solutions that we can offer our clients. We are a capital solutions provider: treaty, program, facultative, hybrid solutions. Whether it be single risk, portfolio or other bespoke solutions, our focus is that of a client-based perspective where we look to bring the appropriate expertise to each transaction for the sole benefit of the client. The transparency of our environment is a major part of our value proposition.
Being privately owned and independent enables us to take a long-term view and build a business for the next 25 years to create long-term value for our clients. This uniquely positions us in comparison to other recent start-ups or broker aggregators which traditionally have shorter lifespans and greater pressure to grow solely for the reason of maximising value for their investor’s inevitable exit within a three-to-five-year time horizon.
How does the fac unit at Lockton Re work with other areas of the Lockton group in putting together client programmes?
At Lockton Re our strategy in building out the reinsurance team is that of a truly collaborative environment, where the traditional silos between treaty and fac and within business lines have been purposefully blurred to facilitate the goal of providing the right reinsurance solutions for our client partners.
We find ourselves in the unique position of building from the ground up with the flexibility to challenge the established norms within the industry. We believe the collaborative culture that we have established is what our clients are expecting and will ultimately make the difference for our client partners.
We have found the Lockton organisation to be incredibly collaborative and helpful. Everyone is pushing in the same direction, which always puts the client first and foremost and truly values all colleagues.
What was your perspective on recent fac renewals, and what is your outlook for upcoming renewals?
What we have seen from an overall market standpoint is an increase in demand as well as price increases for both casualty and property markets. While previously nat-cat-exposed risks may have faced the largest price increases, we are now seeing this trend across all occupancies.
Considering both attritional and man-made loss activity over the past five years, these trends have been pushing forward at a rapid rate. In addition to pricing, the long overdue tightening of terms and conditions has also played a large role in the continued hardening of the market.
As far as we can see, the trend of contracting risk appetite and capacity will continue through the end of 2020, which will be accompanied by a hardening rating environment. There is a significant amount of new capital coming into the excess and surplus lines market, as announced recently, but we don’t believe this new capital will create a supply-and-demand imbalance which would soften the rating environment.
In addition, between trapped capital and losses, and reserve increases within casualty lines, we believe the market will remain firm for the foreseeable future.
How would you describe the challenge of building a book of new business during the coronavirus lockdown?
We find ourselves in the very fortunate position of having longstanding client and market relationships. While Lockton Re may be considered a new player in the reinsurance space, our team of brokers is certainly not. With decades of experience in not only the broking space but the underwriting space as well, we are more than well positioned to continue to manage through this hard market cycle.
Lockdown has provided us with a venue to show off our creativity and flexibility that has contributed to actual book growth during this time. Through a combination of Lockton’s technological capabilities and the ability to instantly connect with clients via video conference, our ability to adapt to the current environment has been an asset.
The coronavirus lockdown has certainly presented all of us with challenges both personally and professionally. It’s difficult for everyone to delicately balance working from home with family obligations. Some needed to instantly become a full-time teacher to educate children or care for elderly loved ones – all while continuing to work productively.
We are immensely proud of how our associates have taken to the challenge and the compassion they have shown to each other and clients. During this time of unknowns our first thoughts have been, as they should be, with the health of our teams and clients. If we have our health the other challenges are minor in comparison.
Where do you see the greatest potential for growth in your existing fac book, and what emerging risks offer opportunities for the fac market?
We see potential for growth across both property and casualty within a continued hardening market. Emerging risks are always areas of opportunity but, given our current point in the market cycle, we see the market being very wary of risks such as pandemic and non-damage BI for property.
We see most of these emerging risks not being understood well enough for the underwriting community to fully evaluate the exposure and loss potential, which leads to coverage being difficult to find.
We view this not as a negative but rather a challenge and an opportunity to work creatively with our partner markets as we share collective information to better understand these risks and develop the right solutions.